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  • richard evans

BoC suprise with 50bps rise but signal cycle coming to an end

Good morning

For the first time for many months I saw a minus temperature when I was out yesterday evening. I don’t know how cold it got overnight but there is an almighty frost this morning. A quick peak at the forecast suggests these low temperatures will be with us for a while yet. White Christmas anybody?

US dollar weakened steadily through the day yesterday with GBPUSD trading up to 1.2235 and EURUSD to 1.0550 from lows around 1.2110 and 1.0445 respectively. Not much data to get our teeth into today, Lagarde speaks at midday but I do wonder whetehr we will continue treading water until next weeks rate announcements.

USDCAD traded just below 1.3600 after the BoC rate announcement that saw a 50bps rise to 4.25%, more than the 25bps we were expecting. This knee-jerk CAD strength didn’t last long as the market looked at some rather dovish comments from BoC that suggest they may actually be done with rate rises for now. USDCAD pushed back up above pre-announcement levels and on to 1.3690 before settling back around current levels at 1.3670. 4.25% was what many were calling as the peak of Canada rates and while BoC say they are prepared to do more if necessary, the feeling is this would well be it for the foreseeable future.

Oil prices have dropped over 10%, WTI has been around $72 and Brent down to $77. Lets see how it takes for that to filter down to the pumps, where it still costs £150 or so to fill up my car. This move is something of a surprise, particularly with China steadily opening up again and reports that Russian oil exports have fallen since the EU price cap came into effect earlier this week,

Putin raised the topic of nuclear weapons in a televised speech yesterday. He seemed to suggest that Russia would not be the first country to use such weapons in this war but leaves the use of them open if necessary. Seems the recent attacks on Russia airfields, blamed on Ukraine, marks the first time we have really seen an attack on Russia’s mainland, which could well be the reason for Putin raising the nuclear issue once again.

I’m out and about again for much of the day today, this time a pleasant lunch with one of the counterparties we use for our client business. That counts as work in my book……

- 12.00 ECBs Lagarde speaks

- 13.30 US initial jobless claims

- 01.30 China CPI


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